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Dollar dives on weak jobs growth

TIM PALMER: Well, those surprisingly weak jobs numbers out yesterday sparked a major fall in the Australian dollar. Will that though be enough for the Reserve Bank to step in with another rate cut?

Well, I'm joined in the studio now by business editor Peter Ryan. Peter, the dollar yesterday fell to a 3.5 year low. What's it telling us about the Australian economy?

PETER RYAN: Well, Tim, that loss of almost 32,000 full-time jobs in December was indeed a shock. Most economists had been tipping jobs growth of around 10,000.

That makes Australia, 2013, Australia's worst year for job creation in 17 years. So it's proved that employers are edgy at the moment, playing it safe by taking on casuals and part-timers as opposed to permanent staff.

Now the jobless rate stayed at 5.8 per cent but that's only because the participation rate is down to 64.6 per cent, meaning some people have given up the job hunt as we heard just then.

So the outlook for bumpy months ahead was a queue for traders to dump the Australian dollar. It fell almost one US cent when those ABS (Australian Bureau of Statistics) job number hit yesterday and late last night it well to 87.79 US cents - the lowest since July 2010.

TIM PALMER: Well Peter, the dollar was already sliding earlier this week before the job figures came out. What's the other pressure on it?

PETER RYAN: Well, there's a big factor and that's the strengthening of the US dollar as America's economy continues to recover. So when the greenback rises, the Australian dollar falls.

Another factor also is that money markets have been looking for triggers to sell and that's based on comments late last year from the Reserve Bank Governor Glenn Stevens that he wants to see the Australian dollar pushed down to around 85 US cents.

PETER RYAN: Well, the Reserve Bank has been factoring in a jobless rate this year of 6 per cent but that fall in participation rate would be a concern, so some economists are now tipping at least one more rate cut this year. But signs that sectors like housing, construction and retail are strengthening have most tipping rates will stay on hold for the year and the next move might be up, but not till 2015.

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